2017 China Insurance Review

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2017 Insurance Review

FEBRUARY 2018

Thomas P. Fitzgerald Chairman Winston & Strawn LLP

Foreword

The continued growth of China’s insurance market means more opportunities for established and new insurance companies and insurance intermediaries looking to expand or create a foothold there.

Winston & Strawn, a leading expert in cross-border M&A, contentious, and regulatory work, established offices in Hong Kong in 2008 and in Shanghai in 2009 in order to better serve our clients that operate in Asia. Our presence in Hong Kong and Mainland China has allowed us to broaden our services and extend the reach of our practices to include insurance expertise for the PRC.

I hope that you find this booklet useful. Please feel free to reach out to our China team should you have any questions or require any additional information. You will find their contact details at the end of this booklet.

Attorney advertising materials – © 2018 Winston & Strawn LLP 1. Introduction The overall outlook for China’s insurance industry has enjoyed robust growth in recent years. Total premium income, for example, China is healthy and rose 27.5% in 2016 to reach RMB 3.1 trillion (USD 490 billion), the strongest growth the industry has enjoyed statistics for 2017 show since 2008. As well, by the end of 2016, total insurance industry assets stood at RMB 15.12 trillion (USD 2.39 that overall insurance trillion), a 22.3% increase from the start of the year. Premium growth slowed in 2017 due in large part to premium income rose China Insurance Regulatory Commission (“CIRC”) reforms aimed at universal life insurance. Nonetheless, the overall 18.6% from a year earlier outlook for China is healthy and statistics for 2017 show to RMB 3.66 trillion (USD that overall insurance premium income rose 18.6% from a year earlier to RMB 3.66 trillion (USD 571.33 billion). 571.33 billion)

This booklet provides an overview of key developments in the PRC insurance industry in 2017 and explains how These priorities were confirmed and further developed in these developments impacted foreign investors in 2017 the December 2017 Central Economic Work Conference, or may impact foreign investors in 2018. It then moves on which effectively set the tone for China’s 2018 economic to an attempt to forecast regulatory trends in 2018 and policies. Thus, this agenda is clearly reflected in, and beyond. It concludes with a discussion of some statistical indeed may be the impetus behind, many of the trends highlights and key growth drivers of China’s insurance and developments discussed herein. industry. Key insurance-specific developments that occurred in 2017 include, among others: 2. Developments in 2017 • the Ministry of Finance announcing in November that Overall, 2017 was both an exciting and turbulent it will further open the door to foreign investment in year for China’s insurance industry. In particular, 2017 China’s life insurance industry; encompassed both the annual plenary sessions of China’s two national-level decision-making bodies, the • the CIRC promulgating requirements for collateral in National People’s Congress and National Committee of cross-border reinsurance transactions and concluding the Chinese People’s Political Consultative Conference, a framework agreement for China–Hong Kong mutual and a meeting of the highest body (formally speaking) solvency recognition; within the Communist Party that occurs only once every five years, the 19th National Congress of the • the CIRC implementing a wave of new regulations Communist Party of China. In both instances, the meant to address excessive risk and to reorient the Chinese government clearly communicated its national industry towards long-term sustainable growth; economic and social agenda, which overall seems likely to have a positive effect on the medium- to long-term • the State Council establishing a cabinet-level super development of the insurance industry. Specifically, it laid regulator to coordinate financial regulation; and out a relatively low-growth (i.e., 6.5% for 2018) agenda that prioritizes reducing financial risk and deleveraging • China’s new Cybersecurity Law coming into force. the economy while encouraging “quality growth,” greater openness to foreign investment, and giving priority to We discuss each of these developments in further detail social development. below.

© 2018 Winston & Strawn LLP 2 on the reinsurance treaty, unless such offshore reinsurer In November 2017, the has provided eligible collateral. On 23 February 2017, the CIRC promulgated the Notice Ministry of Finance on Matters Relating to Collateral Provided by Offshore announced that, among Reinsurers, which specifies that the following types of collateral make offshore reinsurance eligible for a lower other things, it will allow risk factor under C-ROSS: qualified foreign investors • cash deposits into the Chinese ceding company’s bank account with a commercial bank established in China, to take majority stakes subject to certain other requirements; in Chinese life insurance • a standby letter of credit that names the Chinese ceding company as the beneficiary, is irrevocable, joint ventures clean, and unconditional, and satisfies certain other requirements; and

2.1 Further Opening of the Market • other collateral recognized by the CIRC. to Foreign Investment Whether the clarity provided by this notice will lead After US President Donald Trump’s visit to the PRC in to increased opportunities for foreign reinsurers in November 2017, the Ministry of Finance announced that, China remains to be seen. At the time of this booklet’s among other things, it will allow qualified foreign investors publication, the general view amongst reinsurers was to take majority stakes in Chinese life insurance joint pessimistic on the basis that “other requirements” were ventures. Regulators are still drafting detailed rules, but too demanding. the key change involves raising the foreign-ownership cap for life insurance companies from 50% to 51% after PRC–HK Mutual Solvency Framework three years and removing it entirely in five years. Agreement On 16 May 2017, the CIRC concluded a framework In the wake of this announcement, multiple foreign agreement with the Hong Kong Insurance Authority insurance companies have announced plans to further (“HKIA”) to achieve mutual recognition that the solvency expand existing operations in China by taking a larger regimes of the PRC and Hong Kong are equivalent stake in their joint ventures. (“Framework Agreement”). Under the Framework Agreement, the CIRC and the HKIA aim to complete an equivalence assessment of their solvency regimes within 2.2 Developments in Reinsurance four years (note: Hong Kong has yet to develop its own RBC regime). Mutual equivalence recognition is meant to CIRC Requirements for Collateral in Offshore help increase cooperation between the two regulators, Reinsurance Transactions provide regulatory and supervisory convenience, and By way of background, China’s risk-based capital prevent administrative overlap. (“RBC”) regime, the China Risk Oriented Solvency System (“C-ROSS”), came into effect in 2016. C-ROSS If the Framework Agreement is implemented, insurers, generally applies a higher risk factor to reinsurance reinsurers, and brokers operating in these markets could ceded to offshore reinsurers. Furthermore, though potentially see significant benefits. As noted above, C-ROSS does not require that collateral be provided by C-ROSS currently accords unfavorable capital treatment offshore reinsurers, it subjects uncollateralized offshore to reinsurance by reinsurers that operate in the PRC reinsurance to an even higher risk factor. Essentially, this on a non-admitted basis. Recognition of Hong Kong’s means that C-ROSS applies a higher minimum capital RBC regime as equivalent under C-ROSS may end such requirement to the PRC cedant to guard against the unfavorable capital treatment of Hong Kong reinsurers. counterparty risk that the offshore reinsurer will default It is too early to say for sure, but this may provide

© 2018 Winston & Strawn LLP 3 opportunities for foreign reinsurers to expand their Failure to collect and handle personal information in operations in Mainland China by way of Hong Kong. accordance with the Cybersecurity Law is punishable by a maximum fine of ten times the illegal gain or RMB 1 million (approx. USD 156,000), while the maximum fine for 2.3 PRC Cybersecurity Law illegally transferring personal information outside of China is ten times the illegal gain or RMB 500,000 (approx. The Cybersecurity Law of the People’s Republic of USD 78,000). In addition to the foregoing, the competent China (“Cybersecurity Law”), which focusses mainly on authority may, if the circumstances are serious, issue a cybersecurity and the handling of personal information, temporary suspension order, correction order, or even a came into force on 1 June 2017. Though it does not closure notice to the offending party. specifically target the insurance industry, many of its provisions effectively apply to any organization that operates a computer network in the PRC. Naturally, this includes insurers, which typically collect insureds’ The Cybersecurity personal information in high volumes and store such information on computer networks (that may or may not Law’s potential impact be physically located in the PRC). on insurance market The Cybersecurity Law’s potential impact on insurance market participants is significant, as many of its provisions participants is significant, are onerous. For example, the Cybersecurity Law requires that relevant entities: as many of its provisions are onerous. • take proactive compliance measures, such as drafting cybersecurity policies and emergency response plans and appointing a cybersecurity officer to implement the aforesaid and to work with authorities in the event of a 2.4 CIRC 2017 Industry Reforms breach; Background • obtain users’ (in this case, the insureds) prior consent CIRC chairman, Xiang Junbo, was dismissed from office before collecting and storing any personal information; in April 2017. During his tenure, which began in October and 2011, Xiang implemented far reaching liberalization reforms, including, among other things: • abide by restrictions on the nature of the information and personal information that may be collected (e.g., • easing licensing requirements (permitting 52 new it must be necessary for the business purpose in insurers to begin operations); question) and how it may be used. • allowing insurers to invest more of their funds and to invest more heavily in equities and other higher-risk The stipulation that has drawn the most attention is investments; and the prohibition on certain entities transferring personal • implementing reforms that allowed insurers to sell information outside of China unless it is necessary for high-return and high-risk wealth management products business purposes and the transferor has performed (“WMPs”). a security assessment. Consent of the user may also be required. It is not yet certain whether this restriction Although Xiang’s reforms resulted in a near tripling of applies to insurance market participants. However, the assets and doubling of premium income for Chinese draft Measures on Security Assessment for Cross-border insurance companies, they also led to Chinese insurers Transfer of Personal Information and Critical Data, which becoming increasingly dependent upon WMPs. In were circulated on 11 April 2017, seem to indicate that particular, universal life insurance, a WMP with flexible they will be subject to these restrictions. We expect this surrender terms, high guaranteed annual returns, and a point to be further, if not conclusively, addressed in 2018. minimal death benefit, became very popular during this time. By the end of 2016, 70 of China’s 76 life insurance

© 2018 Winston & Strawn LLP 4 insurers and, upon finding irregularities, temporarily barred several of them from selling universal life In search of higher returns, insurance online or, in some cases, at all. Then, on 30 December 2016, the CIRC promulgated the Circular on insurers invested premium Further Enhancement of Personal Insurance Regulation, which essentially banned from opening new branches income into high-risk, all insurers whose universal life insurance premiums longer-term, and relatively accounted for half or more of overall premium income. illiquid assets, such as As 2016 drew to a close, the CIRC sent clear signals that reforms against excessive risk would continue into 2017. large equity stakes in 2017 Reforms and Investigations listed Chinese companies In 2017, the CIRC vigorously advanced the anti-risk reform and offshore assets. campaign that it initiated in 2016. Discouraging Universal Life Insurance and companies were offering such products, which, for 14 of Encouraging Protective Policies these insurers, produced more than 70% of their total On 21 April 2017, the CIRC issued a high-level guidance, premium income. the CIRC Notice on Further Strengthening Risk Prevention and Control of the Insurance Industry (“Risk This dependence was problematic due to the Prevention Notice”), which stated its long-term intention fundamental incompatibility between the flexible to strengthen China’s insurance regulatory regime and surrender terms and the rate of return promised to close risk-management loopholes. The Risk Prevention investors. In search of higher returns, insurers invested Notice listed 39 specific areas for reform or stricter premium income into high-risk, longer-term, and relatively enforcement with a view to reducing systemic risk in the illiquid assets, such as large equity stakes in listed industry, discouraging wealth-management products, and Chinese companies and offshore assets. Due to the encouraging traditional protective insurance (e.g., long- duration mismatch, any downturn in sales or failure of an term life insurance, annuities, and health insurance). investment to deliver the expected returns could have provoked a liquidity crisis. On 11 May 2017, the CIRC promulgated the Circular on Regulating the Development and Design of Concerned about the high level of risk, the CIRC took Products by Personal Insurance Companies (“Product action on 7 March 2016 and promulgated the Circular Development Circular”), which reiterated the goals of the on Matters Concerning the Standardization of Medium- Risk Prevention Notice and enacted further restrictions and Short-term Life Insurance Products (“Short-Term on universal life insurance, including banning the Life Insurance Circular”). Essentially, the Short Term Life sale of universal life insurance as a rider to traditional Insurance Circular prohibited insurers from selling certain policies. Insurers commonly used these riders as a universal life insurance products and assigned an overall way to promote sales of their traditional policies. But ceiling on annual premium income from universal life the excessive risk associated with the riders’ different insurance to each insurer based on its capitalization surrender terms and duration requirements made them a and net assets. The Short-Term Life Insurance Circular target for the CIRC. stipulated that insurers would have to reduce their sales of other universal life insurance products from 90% of On 28 August 2017, the Ministry of Finance and the overall limit in 2016 to 50% by 2018. This circular also other relevant government bodies promulgated the implemented other measures, such as barring insurers Memorandum of Cooperation on Joint Disciplinary with low solvency adequacy ratios from selling universal Sanctions Against Relevant Parties Liable for Illegal life insurance. and Dishonest Behavior in the Insurance Sector (“Memorandum”). The Memorandum directs government For the remainder of 2016, the CIRC continued to rein entities and departments to, among other things: in universal life insurance. It investigated a number of

© 2018 Winston & Strawn LLP 5 • blacklist parties found to have engaged in illegal or dishonest behavior in the insurance industry; The CIRC also dismissed • make such behavior a matter of public record; and Xiang Junbo in April 2017 • cooperate to sanction such individuals and entities on the grounds that he by, among other things, restricting or prohibiting their involvement in establishing banks, issuing bonds, or had “severely violated offering Internet information services. party discipline.” In addition to its reforms, the CIRC began conducting stricter risk assessments on insurance asset management and investments—and, in the autumn of 2017, the CIRC As mentioned above, the CIRC also dismissed Xiang took action by: Junbo in April 2017 on the grounds that he had “severely violated party discipline.” The Communist Party has • barring several insurers from selling new universal expelled the former chairman and turned him over to life insurance products, ordering them to rectify the prosecutors to face criminal charges for corruption. problems in question, and imposing other sanctions; Ultimately, the combined effect of the CIRC’s reforms and • stopping the issuance of new insurance licenses and increased enforcement efforts has been dramatic:sales requiring certain new insurers to provide supplemental of universal life insurance products plummeted 50.3% materials explaining their business plans before they year-over-year in 2017. could begin operations; and Restrictions on Insurers’ Investments in Listed • fining some insurers’ senior management personnel Chinese Companies and even banning them from the insurance industry. As previously mentioned, the CIRC has come to view insurers’ concentrated investments in equities as The following table summarizes some of the CIRC’s more constituting an excessive risk. On 24 January 2017, the noteworthy enforcement actions: CIRC promulgated the Circular on Further Strengthening Stock Investment by Insurance Funds (“Stock Investment Cracking the Whip Circular”). The Stock Investment Circular, which restricts Company Total assets Owner Regulatory move Chinese insurers’ ability to invest in listed Chinese Evergrande 60b yuan Hui Ka-yan Probed by inspectors from the companies, provides, among other things that: Life Insurance China Insurance Regulatory Commission in December and later ordered to suspend its • all investments above 5% of a listed Chinese company online business or investing in are now subject to filing requirements with the CIRC; stocks Foresea Life 155.36b Yao Zhenhua Probed by CIRC inspectors in Insurance yuan early December and later ordered • prior review and approval from the CIRC is required for to suspend its online business company acquisitions (i.e., investments by which the and stop issuing new universal life insurance policies for three insurer will acquire controlling power as defined by the months Stock Investment Circular); Sino Life 400b yuan Zhang Jun Probed by the CIRC in May and by Insurance the Communist Party’s disciplinary commission in September; • an insurer’s investment in a single stock may not Zhang taken away in February exceed 5% of the insurer’s total assets; for investigation; outcome and Zhang’s whereabouts are unknown • the total value of an insurer’s equity investment Huaxia Life 262.4b Xiao Jianhua Ordered by the CIRC to suspend portfolio may not exceed 30% of its total assets; and Insurance yuan its online business and barred from issuing new products for three months • insurers investing in listed Chinese equities must not Source: South China Morning Post fall below certain minimum comprehensive solvency margin ratios.

© 2018 Winston & Strawn LLP 6 The Stock Investment Circular also subjects company guiding local authorities and financial regulators. Noting acquisitions to a number of additional restrictions— that the FSDC is headed by a vice-premier, some including, e.g., the insurer may only use funds from its commentators suggested that it may be more powerful own equity, may not acquire a target in concert with than a government ministry. Others have suggested that any entity not subject to CIRC regulation, and may it will wield great influence comparable to that of the not use listed stock assets as collateral to finance an National Development and Reform Commission (NDRC), acquisition. Further, the Stock Investment Circular limits China’s central economic planner. the companies that insurers may acquire to those with a stable cash flow and which are insurance companies, By way of background, the high systemic risk caused non-insurance financial institutions, or companies by excessive credit and debt and lax government operating in industries that relate to insurance business oversight has been a serious, widespread, and persistent and conform to national industrial strategies. problem throughout China’s financial system. Indeed, the excessive risk in the insurance industry discussed Compliance in Section 2.4 above is merely one manifestation of this On 30 December 2016, the CIRC promulgated the broader phenomenon. Other recent examples include final version of the Measures on the Compliance the 2015-2016 China stock market turbulence and the Management of Insurance Companies (“Compliance proliferation of illegal fundraising schemes that, in some Measures”), which, among other things, require cases, have led to “mass incidents” in which defrauded insurers to establish compliance departments that: are investors have taken to the street to protest government independent of departments that may be in conflict with inaction. their responsibilities for compliance management (e.g., finance, investment, and audit departments); and, are China’s financial oversight system has struggled to deal headed by a senior manager who is not concurrently the with these crises, and some experts have attributed this head of such a conflicting department. The Compliance difficulty to the fragmented nature of the system, which Measures also require annual compliance reports and consists of four separate entities, the China Banking provide that the CIRC shall conduct on-site inspections. Regulatory Commission (CBRC), the People’s Bank of China (PBOC - China’s central bank), the China Securities Insurance Funds Management Regulatory Commission (CSRC), and of course, the CIRC. The CIRC has also implemented new rules that ban These entities have been criticized as operating in silos companies that manage assets on behalf of insurers from and the creation of a super regulator is an idea that has requiring guaranteed fixed returns on their investments been circulating for at least a decade. in equities or paying back the principal. This policy, which is set out in the CIRC’s 27 December 2017 Circular The Chinese government decided to establish the on Relevant Matters Concerning the Establishment of FSDC in July 2017 during the National Financial Equity Investment Plans with Insurance Funds, is viewed Work Conference (NFWC), a high-level closed-door as an attempt to encourage insurance asset managers government financial regulation meeting that takes to be more cautious when investing in public-private place only once every five years and plays a key role in partnership projects and thereby discourage high risk determining the general direction of financial regulation investments. in China.

The FSDC held its inaugural meeting in November of 2.5 Financial Stability 2017. It would be premature to offer specific predictions Development Committee about how the FSDC will impact China’s insurance industry. Indeed, the establishment of the FSDC may The State Council has established the Financial Stability be only the prelude to a much larger reform of China’s Development Committee (FSDC), a cabinet-level “super financial regulatory bodies. At the time of publication, regulator” that will coordinate financial regulation in a rumors are circulating that the Chinese government is bid to help China’s financial system better cope with considering merging the CBRC and the CIRC, or that excessive risk. The FSDC will have the authority to it may pursue other options such as giving the PBOC supervise the implementation of monetary policy and power to oversee the work of the CIRC, CBRC and CSRC. financial regulation, and this includes questioning and

© 2018 Winston & Strawn LLP 7 We are cautiously optimistic that, if properly implemented, such reforms will help further the maturation of China’s insurance industry and be propitious towards foreign The CIRC stated that investment. it will take three years

3. Looking Forward to 2018 to resolve the problem of excessive risk in the We predict that 2018 will be an eventful year. Specifically, we expect that the CIRC will follow through on its insurance industry announcement that it will remove restrictions on foreign ownership in life insurance and that it will continue its reforms of the industry. We think that both developments will create new opportunities for foreign insurers. 3.1 General Plan for Risk Reduction and Reform of the As mentioned, the CIRC’s April 2017 high-level guidance, Insurance Industry the Risk Prevention Notice, clearly stated the CIRC’s long-term intention to continue to strengthen China’s Solvency insurance regulatory regime and close risk-management It is a widely-held view that the CIRC reforms and loopholes. Indeed, in January of this year, the CIRC enforcement actions discussed above in Section 2.4 stated that it will take three years to resolve the problem narrowly averted a liquidity crisis in China’s insurance of excessive risk in the insurance industry and, on industry, but that certain insurers are still in a precarious 12 January 2018, promulgated the General Plan for position. Unofficial sources indicate that Chinese insurers’ Risk Reduction and Reform of the Insurance Industry net cash flow dropped 65% to RMB 633 billion (USD (“General Plan”). Citing the policy directives of the 19th 100 billion) in 2017, and many observers are concerned National Congress of the Communist Party of China, and about the liquidity of certain smaller insurers that were the 2017 National Financial Work Conference and Central heavily dependent on universal life insurance. However, Economic Work Conference, the General Plan outlines larger well-established insurers are not thought to be the measures that the CIRC will take over the next three facing a liquidity crisis because of their focus on long- years to reduce financial risk and enhance stability in term products and relatively conservative investment China’s insurance industry. strategies. In this regard, it is not a surprise to see that the General Plan indicates that the CIRC will target the Most of the measures set forth in the General Plan seek minority of companies that pose localized risks and take to reduce risk through implementing stricter enforcement “regulatory measures” against such insurers to ensure or enacting regulatory measures targeting the solvency that such localized risks do not become systemic. More of insurers and investment of insurance funds. The concretely, this means identifying and monitoring insurers General Plan also focusses heavily on corporate that have rapidly depleted capital and preventing them governance and investment in insurers and other from becoming capital deficient. In particular, the General measures, such as stronger consumer protection. Plan states that the CIRC will closely monitor the cash flow dynamics of life insurance companies as they adjust Ultimately, the General Plan is a high-level policy their business structure (we believe this means adjusting document that states the CIRC’s reform agenda for the to restrictions on universal life insurance discussed next three years. It is not legislation and does not specify above) and take measures to guard against liquidity a precise timetable for implementing any of its contents, risks. Interestingly, the General Plan also singles out which themselves are non-specific and presumably foreign-invested insurers that have continuously failed subject to change as political and economic conditions to meet solvency requirements as a target for regulatory evolve. With the foregoing in mind, we set out below a measures. brief summary of some key points of the General Plan and make reference to existing draft measures and other While the above measures are meant to address CIRC documents that are relevant to such key points. existing or imminent problems. The General Plan also states that the CIRC will take a number of proactive

© 2018 Winston & Strawn LLP 8 as investments with a duration mismatch and “irrational” acquisitions. For greater clarity, irrational acquisitions The CIRC will further is a pejorative term commonly used by the Chinese authorities to refer to large high-profile investments, enact measures to typically overseas, in areas such as real estate, sports prevent insurers from and entertainment. investing premium income Although 2018 has just begun, the CIRC has already taken action on this front. Specifically, on 24 January, in high risk investments, it promulgated the Measures for the Administration of the Utilization of Insurance Funds (“Insurance Funds such as investments with Measures”), which will come into force on 1 April 2018. The Insurance Funds Measures impose a number of a duration mismatch and restrictions on the use of funds, including, for example, restricting outbound investment, limiting the ability “irrational” acquisitions. of insurance company shareholders to interfere in the operation of insurance funds, and baring asset management firms that manage insurance funds from measures to reduce systemic risk moving forward. This reassigning such funds. includes improving the system for regulating insurance groups through, among other things, amending both Corporate Governance and Investments in the Insurance Group Company Management Measures Insurers to effectively reduce insurance group operating risk The General Plan states that the CIRC will strengthen and the Interim Measures for the Administration of corporate governance by, among other things, drafting Non-insurance Subsidiaries under the Insurance new measures for improving internal corporate Companies to prevent the transfer of risks. Furthermore, governance mechanisms and enhancing CIRC the General Plan indicates that the CIRC will improve supervision. We expect that the CIRC will soon issue the solvency regulation system (we assume this means new corporate governance measures. Indeed, the refining C-ROSS to, among other things, favor long-term CIRC has already issued a Consultation Paper on Draft protective products) while closely scrutinizing solvency Rules Governing Insurers’ Independent Directors. data submitted to it by insurers and harshly punishing any Issued in December 2017, this document recommends instances of fraud. greatly enhancing the role of independent directors in the corporate governance of insurers. For example, Finally, the General Plan also indicates that the CIRC it recommends mandating that all insurers’ boards of will revise the Insurance Protection Fund Management directors have at least two independent directors and Measures, which regulates the insurance industry relief that such independent directors comprise no less than fund into which all insurers pay a portion of their premium one third of the board. Similarly, shareholders that hold income. The CIRC has already circulated a draft of the more than one third of an insurer’s shares would be revisions. prohibited from nominating an independent director.

Use of Funds The General Plan further states that the CIRC will With a view to reducing and controlling risk, the also closely scrutinize the shareholders of insurers General Plan indicates that the CIRC will strengthen by reviewing their background, qualifications, and its regulation and supervision of the use of insurance relationships, and, where necessary, forcing such funds. In particular, the CIRC will focus on uncovering shareholders to exit the industry. Indeed, the CIRC and punishing illegal investments by insurers, including appears very determined to root out “illegal investments” the use of leveraged insurance funds, investments with a in insurance companies (e.g., investments that have multi-layer embedded structure (i.e. products that invest exceeded legal shareholding limits or violated other in other products), and illegal overseas investments. The restrictions through nominee shareholders, reporting CIRC will further enact measures to prevent insurers from false materials, and other means). The CIRC has already investing premium income in high risk investments, such ordered certain shareholders of some smaller insurers to

© 2018 Winston & Strawn LLP 9 sell their shares after it uncovered irregularities, such as falsified information and shares held through proxy. For instance, in December 2017, the CIRC ordered Kunlun Many of the smaller, Health Insurance Co. to replace certain shareholders within three months and blacklisted the relevant investors newly established from future insurance market entry. As of the time of publication, rumors are circulating that the CIRC will force insurers will likely struggle Anbang Insurance Group Co., one of China’s largest to adjust to the new insurers, to sell at least some of its shares. regulatory reality. The CIRC’s stepped up enforcement efforts will be accompanied by an overhaul of the market access system. The CIRC has already issued two drafts of the the General Plan states that the CIRC will amend the Administrative Measures for Equities of Insurance Administrative Regulations for the Administration of Companies (the most recent 19 July 2017 draft, the “Draft Foreign-funded Insurance Companies. The General Plan Measures”), which set out new restrictions on equity does not explain in detail the nature of the amendments, holdings in an insurance company that are meant to but mentions, without elaborating, the establishment of a address the problem of investors taking over insurance negative list for market access. companies and using them to raise funds for high-risk investments. Key reforms proposed in the Draft Measures Consumer Protection and Other Measures are as follows: The General Plan indicates that the CIRC will enhance its supervision of insurers, in particular by • Subject to certain exceptions, the Draft Measures improving the insurance product management system would lower the limit on the shareholding by a single through standardized product development and the shareholder in a Chinese insurance company from the implementation of a product inspection system. The CIRC current 51% to one-third. will also implement more on-site inspections, enhance its scrutiny of data and statistics reported to it by insurers, • The Draft Measures divide insurance company and improve the process for reporting illegal acts. shareholders into three categories: financial shareholders, strategic shareholders, and controlling Finally, the General Plan states that the CIRC will shareholders, and subject each category to differing implement a number of measures that seemed designed restrictions (e.g., a prohibition on transferring their to protect consumers. Specifically, it will seek to curb equity interest for a certain period of time) and illegal fund-raising, with a focus on part-time insurance requirements (e.g., profitability and ability to provide sales and third-party wealth management. The General further capital). Plan goes so far as to state that the CIRC will severely punish staff of regulatory agencies that have not been The regulations currently in force expressly stipulate sufficiently diligent in preventing and handling such illegal that a separate set of rules applies to foreign- fund-raising. The General Plan further states that the CIRC invested insurance companies (i.e., those with foreign will implement reforms to curb misleading sales practices shareholdings of 25% or more) and a previous draft and foster a better handling of consumer dissatisfaction. of the Draft Measures also made this stipulation. Interestingly, the current Draft Measures do not Analysis substantially address the qualification requirements Ultimately, the CIRC’s recent and anticipated reforms imposed on foreign investors. If the provisions of the should help foster the long-term sustainable stable Draft Measures—especially the one-third maximum growth and increasing sophistication of China’s insurance shareholding provision—are actually meant to apply industry. They may also confer a competitive advantage to foreign investors, then this would indeed represent on multinational insurers, which, generally speaking, a major change. However, in light of the Chinese have better risk-management standards and strategies government’s recent announcement about further and are better equipped to handle an increasingly heavy opening life insurance companies to foreign investment, compliance burden. As well, multinational insurers can we do not believe that this is the case. Interestingly, offer more sophisticated products that have higher

© 2018 Winston & Strawn LLP 10 margins and more recurring premiums, such as pensions, share of China Life Insurance, a state-owned company retirement planning, and health insurance, all of which are that has historically been China’s largest insurer, has currently underserved by Chinese insurers and favored contracted from 43.5% to 19.9% over the past ten years. by the authorities. Similarly, the combined market share of China’s seven largest insurers slid from approximately 80% in 2014 to Meanwhile, many of the smaller, newly established approximately 60% by early 2017. It remains to be seen insurers will likely struggle to adjust to the new regulatory whether these older insurers can take advantage of the reality. These insurers lack the product design and CIRC’s restrictions on universal life insurance and other internal corporate governance capabilities of their larger reforms and reverse their declining market share. They competitors. As well, they have depended heavily on seem well-positioned to do so, as many of their newer universal life insurance, which, as previously discussed, rivals were highly dependent on income from universal is now restricted. Premium income from this source has life insurance and may be unable to handle the heavier plummeted, and it remains to be seen if smaller insurers regulatory burden. For a list of the largest domestic life will be able to muster the significant marketing resources and non-life insurers in China, please refer to Appendices necessary to sell traditional insurance products. The 1 and 2, respectively. removal of restrictions on foreign investment (as discussed above in Section 2.1) may induce multinationals Foreign insurers, though increasingly present in China, to invest in or partner with these smaller domestic still possess relatively low market shares - 6.7% of the insurers. Though they can no longer rely on universal life life insurance market and 2% of the general insurance insurance to generate significant premium income, these market as of 2017. However, we expect robust growth in smaller insurers are licensed as insurers in the PRC and 2018. As mentioned above, the liberalization of foreign this is a substantial benefit. investment rules will create new openings for foreign insurers to exploit some of their strengths, including providing sophisticated products, technical skills, and 4. Highlights of China’s Insurance risk-management expertise. Industry For a list of the largest foreign invested life and non-life Given the rapid state of development and reform of insurers in China, please refer to Appendices 3 and 4, China’s insurance industry, it is difficult to summarize respectively. the current market conditions. In general terms, China’s insurance industry is still maturing and has significant Reinsurance room to grow. Foreign insurers’ market share is currently With respect to reinsurance, the major domestic modest. However, new regulations, along with economic reinsurers are China Re Group, China Taiping Re, PICC and social growth drivers, have created conditions that Re, and Qianhai Re Domestic. A number of foreign are conducive to their expansion. reinsurers are also active, including Munich Re, Swiss Re, Hanover Re, General Re, Scor Re, RGA, and Lloyd’s. During 2017, a number of foreign reinsurers revealed 4.1 Market Share that they were struggling with low margins in China. However, as discussed below, when looking at the Insurance fundamentals, China appears to be a promising market Large domestic insurers have long dominated China’s for foreign reinsurers due to its rapidly expanding insurance industry. As recently as 2010, the four largest industrial and infrastructure base. As well, as mentioned insurers—People’s Insurance Company of China (PICC), above in Section 2.2, the China–Hong Kong mutual Ping An Insurance, China Pacific Insurance Company solvency recognition framework agreement may create (CPIC), and China Life Insurance—accounted for over new opportunities in China for foreign reinsurers that are 95% of the market’s premium income. However, this was licensed in Hong Kong. before Xiang Junbo transformed the market by allowing the entry of many new insurers. As discussed, many of For further information on some of the foreign and these insurers grew rapidly off of universal life insurance domestic reinsurers operating in the PRC, please refer to premium income and this eroded the market share of the Appendix 5. larger well-established insurers. For instance, the market

© 2018 Winston & Strawn LLP 11 Drivers for Growth Ultimately, China has considerable potential for insurance The key drivers for growth in the Chinese insurance growth. By the end of 2016, its insurance penetration market are: (i) state governance and regulation; and (ii) rate had reached a modest but respectable 2.4% (by economic and social drivers. comparison, Hong Kong and Taiwan have very high penetration rates of 15% and 16% respectively). Indeed, State Governance and Regulation China has a massive $18 trillion “protection gap” that is As discussed, the CIRC’s new regulatory priorities (i.e., projected to increase to $46 trillion by 2020. better risk management and development of more sophisticated insurance products) may slow growth in the short term but should reorient the industry towards long- term sustainable quality growth. As well, these reforms, Health insurance and combined with foreign investment liberalization, should be favorable to foreign insurers, whose strengths typically retirement products will include risk management and product sophistication. Foreign insurers also seem well-positioned to capitalize also grow as government on the One Belt One Road initiative, which promises programs are not keeping to channel USD 1.25 trillion in investments in large construction and engineering projects. With respect up with the aspirations to such projects, foreign insurers can complement the offerings of Chinese insurers through their larger global of China’s middle class networks, greater expertise in technical underwriting, and ability to offer broad coverage. and the needs of its very

Economic and Social Drivers rapidly growing senior In terms of economic and social drivers, life insurance will continue to enjoy robust growth due to the growing population. demand for savings/investment instruments from China’s increasingly urbanized, well-educated, and affluent population. Health insurance and retirement products will also grow as government programs are not keeping up with the aspirations of China’s middle class and the needs of its very rapidly growing senior population. Motor insurance also has room to grow, as China remains relatively underinsured and penetration rates are below those found in more-mature economies.

In more general terms, Chinese corporate insurance buyers are often very price-sensitive and weary of added-value services (e.g., risk control). Many Chinese businesses still self-insure or view insurance as a kind of cash flow management. This is changing, however, and laws and attitudes towards corporate governance and risk management best practices will likely stimulate stronger demand for insurance.

Insurer 2017 Insurance Premium Income (Million RMB)

China Life Insurance Co., Ltd 490252.2923 Ping An Life Insurance Co.of China, Ltd. 342870.4753 Anbang Life Insurance Co., Ltd. 189429.3584 China Pacific Life Insurance Co., Ltd. 169450.5157 Tai Kang Life Insurance Co., Ltd. 111640.2528 Tai Ping Life Insurance Co., Ltd 108812.8735 New China Life Insurance Co., Ltd 103934.5962 PICC Life Insurance Co. Ltd. 103014.9932 Huaxia Life Insurance Co., Ltd. 83322.935 Funde Sino Life Insurance Co., Ltd. 76088.5769 Sunshine Life Insurance Corporation Ltd 48083.4515 Tianan Life Insurance Co., Ltd. 45884.163 Guohua Life Insurance Co., Ltd. 44710.0247 China Post Life Insurance Corporation Ltd. 40471.6396 Hexie Health Life Insurance Co., Ltd. 36066.1324 Qian Hai Life Insurance Co., Ltd. 31075.2201 CCB Life Insurance Co., Ltd. 28562.951 Aeon Life Insurance Co., Ltd. 27537.8896 June Life Insurance Co., Ltd. 26206.5242 ABC Life Insurance Co., Ltd. 23367.1376 Union Life Insurance Co., Ltd. 22797.507 PICC Health Insurance Co., Ltd. 18443.4697 Happy Life Insurance Co., Ltd. 18217.5938 Ping An Annuity Insurance Co. of China, Ltd. 16750.2559 Sinatay Life Insurance Co., Ltd. 11290.4651 Minsheng Life Insurance Co., Ltd. 10561.5355 Pearl River Life Insurance Co., Ltd 9835.5874 Li An Life Insurance Co., Ltd. 8461.2577 Shanghai Life Insurance Co., Ltd. 6226.5665 Sun Life Everbright Life Insurance Co., Ltd. 6185.2572 1 6123.7312 国寿存续

1 Regretfully, the English name of this insurer, which seems to be affiliated with China Life Insurance (Group) Co., is not readily available.

Insurer 2017 Insurance Premium Income (Million RMB)

Jixiang Life Insurance Co., Ltd. 5307.2043 Soochow Life Insurance Co., Ltd. 5129.1466 Taikang Pension & Insurance Co., Ltd. 4978.3883 Greatwall Life Insurance Co., Ltd. 4866.0812 Hong Kang Life Insurance Co., Ltd. 4416.338 Taiping Pension Insurance Co., Ltd. 4356.1854 Bohai Life Insurance Corporation Ltd. 4008.3148 Yingda Taihe Life Insurance Co., Ltd. 3536.8203 Zhongrong Life Insurance Co., Ltd. 3534.5327 Kunlun Health Insurance Co., Ltd. 1466.8324 Guolian Life Insurance Co., Ltd. 826.8915 Anbang Annuity Insurance Co., Ltd. 770.402 Hengqin Life Insurance Co., Ltd. 675.3838 Trust Mutual Life Insurance Co. 412.5437 China United Life Insurance Co., Ltd. 395.427 Huagui Life Insurance Co., Ltd. 357.953 China Merchants Life Insurance Co., Ltd 309.8567 Sino-Conflux Insurance Co. 231.2256 CPIC Allianz Health Insurance Co., Ltd. 144.4947 Hetai Life Insurance Co., Ltd. 90.5894 Fosun United Health Insurance Co., Ltd. 49.1081 Aixin Life Insurance Co., Ltd. 30.8346 China Life Pension Co., Ltd. 0 Changjiang Pension Insurance Co., Ltd. 0 New China Pension Co., Ltd. 0 PICC Pension Co., Ltd. 0

Insurer 2017 Insurance Premium Income (Million RMB)

PICC Property and Casualty Co., Ltd. 315990.2188 Ping An Property and Casualty Insurance Co. of China, Ltd. 193234.4188 China Pacific Property Insurance Co., Ltd. 93497.8952 China Life Property and Casualty Insurance Co., Ltd. 59230.583 China United Property Insurance Co., Ltd 35774.8428 China Continent Property & Casualty Insurance Co., Ltd 33766.4427 Sunshine Property and Casualty Insurance Co., Ltd. 30290.1435 Taiping General Insurance Co., Ltd 19685.4348 China Export & Credit Insurance Corporation 13783.7562 Tian An Insurance Co., Ltd. 12840.9705 Sinosafe Insurance Co., Ltd. 10226.4287 Yong An Insurance Co., Ltd. 7945.9784 Yingda Taihe Property Insurance Co., Ltd. 7844.4892 Huatai Property & Casualty Insurance Co., Ltd. 7168.892 AnBang Property & Casualty Insurance Co., Ltd 6245.8218 Alltrust Insurance Co., Ltd. 5846.9482 ZhongAn Online Property & Casualty Insurance Co., Ltd. 5272.2874 BOC Insurance Co., Ltd. 4947.2914 Anhua Agricultural Insurance Co., Ltd. 4670.7355 Guoyuan Agricultural Insurance Co., Ltd. 4645.711 Zking Property & Casualty Insurance Co., Ltd 4532.7373 Dubon Property & Casualty Insurance Co., Ltd. 3714.7961 Ancheng Property & Casualty Insurance Co., Ltd. 3673.3503 Dinghe Property Insurance Co., Ltd. 3592.1252 Bohai Property Insurance Co., Ltd 3544.2561 Zheshang Property & Casualty Insurance Co., Ltd 3278.5728 Sunlight Agricultural Mutual Insurance Co., 3200.5832 Cinda Property & Casualty Insurance Co., Ltd 2888.8552 The Asia-Pacific Property & Casualty Insurance Co., Ltd 2768.9824 Chang An Property & Liability Insurance Co., Ltd 2734.9243 Funde Property & Casualty Insurance Co., Ltd 1861.7665 Beibu Gulf Property & Casualty Insurance Co., Ltd 1785.3003

Insurer 2017 Insurance Premium Income (Million RMB)

TK.CN Insurance Co., Ltd 1540.6028 Huahai Property & Casualty Insurance Co.,Ltd. 1349.9387 Taishan Property & Casualty Insurance Co., Ltd 1343.0331 Jintai Insurance Co., Ltd 1314.2252 China Coal Insurance Co., Ltd 1218.9512 China Huanong Property & Casualty Insurance Co., Ltd 1204.5279 Urtrust Insurance Co., Ltd 1138.0794 Zhongyuan Agricultural Insurance Co., Ltd 1004.6811 Anxin Agricultural Insurance Co., Ltd 940.572 Champion Property & Casualty Insurance Co., Ltd 890.9848 Yanzhao Property & Casualty Insurance Co., Ltd 772.0181 E An Property & Casualty Insurance Co., Ltd. 769.5171 Anxin Property & Casualty Insurance Co., Ltd 695.2741 Changjiang Property & Casualty Insurance Co., Ltd 690.9681 China Railway Captive Insurance Co., Ltd 569.1083 Xinjiang Qianhai United Property & Casualty Insurance Co., Ltd 527.0733 CNPC Captive Insurance Co., Ltd 484.3739 Sanguard Automobile Insurance Co., Ltd 457.0167 Hengbang Property Insurance Co., Ltd 451.9745 Qomolangma Property & Casualty Insurance Co., Ltd 371.5988 Haixia Goldenbridge Insurance Co., Ltd 335.7025 Zhonglu Property & Casualty Insurance Co., Ltd 322.0276 China COSCO Shipping Captive Insurance Co. 177.8167 Long Property & Casualty Insurance Co., Ltd 158.6216 CCB Property & Casualty Insurance Co., Ltd 148.3967 Donghai Marine Insurance Co., Ltd 136.435 Sunshine Surety Insurance Co., Ltd 114.4746 Union Property & Casualty Insurance Co., Ltd 92.7807 Public Mutual Insurance Corporation 57.8053 Hero Mutual Property Insurance Corporation 2.866

2 2017 Insurance Insurer Foreign Investor (Equity Stake)² Premium Income (Million RMB)

ICBC-AXA Life Insurance Co. Ltd AXA Group (27.5%) 38533.5919

Evergrande Life Assurance Co. Ltd Great Eastern Life Assurance Co., Ltd. (25%) 26925.474

AIA Insurance Group. Ltd AIA Group Ltd. (100%) 18451.8863

BoComm Life Insurance Co. Ltd Commonwealth Bank of Insurance Group (37.5%) 12974.1932

Cigna & CMB Life Insurance Co., Ltd. Cigna Health and Life Insurance Co., Ltd. (50%) 10956.2807

Citic-Prudential Life Insurance Co., Ltd Prudential plc (50%) 10535.9812

Sino-US United Metlife Insurance Co., Ltd MetLife Insurance Co. of Connecticut (27.8%) 9015.8206 MetLife, Inc. (22.2%))

Generali China Life Insurance Co., Ltd Assicurazioni Generali S.p.A. (50%) 8623.8721

Aviva-COFCO Life Insurance Co., Ltd. Aviva plc (50%) 6916.6673

Manulife-Sinochem Life Insurance Co. Ltd. Manulife (International) Ltd. (51%) 6098.2804

Huatai Life Insurance Co. Ltd. Chubb Ina Holdings Inc. (20%) 4098.0424

BOC-Samsung Life Insurance Co. Ltd. Samsung Life Insurance Co. Ltd (25%) 3775.78

BOB-Cardif Life Insurance Co. Ltd. BNP Paribas Cardif (50%) 3770.9536

Allianz China Life Insurance Co. Ltd. Allianz SE (51%) 3718.1673

Aegon THTF Life Insurance Co. Ltd. Aegon N.V. (50%) 2490.9536

Heng An Standard Life Insurance Co., Ltd. Standard Life Aberdeen plc (50%) 2482.468

Ping An Health Insurance Co. of China, Ltd. Discovery Ltd. (24.99%) 1978.8697

Founder Meiji Yasuda Life Insurance Co., Ltd. Meiji Yasuda Life Insurance (29.24%) 1889.7019

Great Wall Changsheng Life Insurance Co., Ltd. Nippon Life Insurance Co. (30%) 1544.849

Cathay Lujiazui Life Insurance Co., Ltd. Cathay Life Insurance Co., Ltd. (50%) 1375.0155

HSBC Life Insurance Co., Ltd. HSBC Insurance (Asia) Ltd. (50%) 1112.7743

2 As discussed above in Section, the 50% foreign ownership cap that applies to life insurance companies has not yet been abolished. The foreign equity stakes in excess of 50% shown below are in companies that were established before the cap was implemented.

2017 Insurance Insurer Foreign Investor (Equity Stake)² Premium Income (Million RMB)

King Dragon Life Insurance Co., Ltd. Taiwan Life Insurance Co., Ltd. (50%) 742.3394

Pramerica Fosun Life Insurance Co., Ltd. The Prudential Insurance Co. of America (50%) 604.0485

Sino-Korea Life Insurance Co., Ltd. Hanwha Life Insurance Co., Ltd. (50%) 426.2038

ERGO China Life Insurance Co., Ltd. ERGO Life Insurance SE (30%) 388.2006 ERFO Group AG (20%)

Old Mutual-Guodian Life Insurance Co., Ltd. Old Mutual Life Assurance Company 331.6061 (South Africa) Ltd. (50%)

Shin Kong-HNA Life Insurance Co., Ltd. Shin Kong Life Insurance Co., Ltd. (50%) 89.3742

Sino-French Life Insurance Co., Ltd. CNP Assurances S.A. (25%) 0.1806

2017 Insurance Insurer Foreign Investor (Equity Stake) Premium Income (Million RMB) AXA Tianping Property & Casualty AXA Versicherungen AG (50%) 7223.2541 Insurance Co., Ltd.

Groupma AVIC Property Insurance Co., Groupama S.A. (50% ) 1771.1568 Ltd.

Liberty Insurance Co., Ltd. Liberty Mutual Insurance Co. (100%) 1378.0732

AIG Insurance Co. China, Ltd. American Home Assurance Co. (100%) 1314.1086

Cathay Insurance Co., Ltd. Cathay Life Insurance Co., Ltd. (24.5%) 1115.0429 Cathay Century Insurance Co., Ltd. (24.5%)

Allianz China General Insurance Co., Ltd Allianz SE (100%) 869.097

Fubon Property & Casualty Insurance Fubon Life Insurance Co., Ltd (40%) 849.4295 Co., Ltd Fubon Property & Casualty Insurance Co., Ltd. (40%)

Samsung Property & Casualty Insurance Samsung Fire Marine Insurance Co., Ltd (100%) 785.8265 Co (China) Ltd.

Generali China Insurance Co., Ltd Assicurazioni Generali S.p.A. (49%) 515.1438

The Tokio Marine & Nichido Fire Tokio Marine & Nichido Fire Insurance Co., Ltd. (100%) 476.7843 Insurance Co. (China) Ltd.

Chubb Insurance (China) Co., Ltd. Federal Insurance Co. (100%) 440.2439

Zurich General Insurance (China) Co., Ltd. Zurich Insurance Co., Ltd (100%) 438.1736

Mitsui Sumitomo Insurance (China) Co., Mitsui Sumitomo Insurance Co., Ltd. (100%) 400.3661 Ltd.

Sompo Japan Insurance (China) Inc. Sompo Japan Nipponkoa Insurance Inc. (100%) 336.1265

Starr Property & Casualty Insurance Starr Insurance & Reinsurance Ltd (72.42%), 174.2679 (China) Co., Ltd. Starr Indemnity & Liability Co. (20%)

Swiss Re Corporate Solutions Insurance Swiss Re International SE (100%) 129.6545 China Ltd.

LIG Property Insurance (China) Co., Ltd. KB Insurance Co., Ltd (100%) 100.2836

2017 Insurance Insurer Foreign Investor (Equity Stake) Premium Income (Million RMB) Hyundai Insurance (China) Co., Ltd. Hyundai Marine & Fire Insurance Co., Ltd (100%) 99.8652

Nipponkoa Insurance Co., (China) Ltd. Sompo Japan Nipponkoa Insurance Inc. (100%) 55.0988

Aioi Nissay Dowa Insurance (China) Co., Aioi Nissay Dowa Insurance Co., Ltd. (100%) 49.1755 Ltd.

XL Insurance (China) Co., Ltd. XL Reinsurance (America) Inc. (51%) 30.8383 XL Insurance Co. SE (49%)

Lloyd's Insurance Co. (China) Ltd. Lloyd’s of London (100%) 10.0539

234

Insurance Business Income as of Q3 2017 Licensed Reinsurance Entities Domestic/Foreign (million RMB)

China Reinsurance (Group) Corporation3 18243 (China Property and Casualty Domestic Reinsurance Co., Ltd) 40049 (China Life Reinsurance Co., Ltd.)

Swiss Reinsurance Co., Ltd. Beijing Branch 7557.34045833 (Q4: 2235.61800620) Foreign

Munich Reinsurance Co. Beijing Branch 6492.9357492 Foreign

Hannover Rück SE Shanghai Branch 4727.258862 (Q4: 1309.820421) Foreign

SCOR SE Beijing Branch 3478.58 Foreign

Qianhai Reinsurance Co., Ltd. 3118.74 Domestic

Taiping Reinsurance (China) Company 2567.95 Domestic Limited

Lloyd’s Insurance Co., (China) Ltd.4 1669.41230683 (Q4: 543.00125805) Foreign

General Reinsurance AG Shanghai Branch 1162.839889 Foreign

RGA Reinsurance Co. Shanghai Branch 407.63686112 Foreign

PICC Reinsurance Company Limited Not Available Domestic

3 Only in relation to the subsidiaries of China Property and Casualty Reinsurance Co., Ltd. and China Life Reinsurance Co., Ltd. 4 Figures also include the non-life insurance business of Lloyd’s. However, this is negligible – see Appendix 4, where Lloyd’s ranks last.

Brinton Scott Gregory Harris Managing Partner, Shanghai Associate, Shanghai +86 21 2208 2654 +86 21 2208 2642 [email protected] [email protected]

Brinton has extensive experience in advising Fortune 500 Greg Harris is a Canadian lawyer who concentrates and large private multinational corporations in various his practice on cross-border M&A, China outbound matters including: investigations (fraud, corruption, and investment and general corporate matters. Having Foreign Corrupt Practices Act); foreign direct investment; worked in China, Taiwan and Canada, his experience mergers and acquisitions (including merger controls); includes advising Asian, European and American reorganizations; joint ventures; construction (Greenfield); companies on their cross-border transactional projects. employment; intellectual property; and technology and His corporate experience includes drafting various licensing. He has advised clients across a broad array agreements (distribution, licensing, confidentiality, of industry sectors including: aerospace; automotive; settlement, consulting, service, royalty, share purchase, chemical; construction; food and beverage; insurance; asset purchase, etc.). medical device; pharmaceutical; publishing; media and entertainment; real estate; and retail.

Susan Deng Jane Zhou Legal Consultant, Shanghai Associate, Shanghai +86 21 2208 2644 +86 21 2208 2694 [email protected] [email protected]

Susan has a focus on general corporate, M&A, regulatory Jane Zhou’s experience includes drafting legal compliance, corporate governance, and foreign direct documents, contracts, legal due diligence reports and investment. She has experience advising on various memos, and employment contract templates in relation legal issues from the establishment of companies to to the different aspects of the establishment of foreign their liquidation/bankruptcy, including advising on invested enterprises in the People’s Republic of China. labor and employment, intellectual property aspects, She has represented clients across the automotive, and commercial contracts. She also has experience insurance and pharmaceuticals & medical devices in advising and managing the entire legal process industries associated with the incorporation of new FIEs, including changing registered addresses and when needed, advising on their liquidation and deregistration.

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